Government signs $25 million credit facility to fund agricbusiness
Government has signed a $25million credit facility to fund the construction of farming implements such as tractors, disc harrows, plows, threshers and assembly plant to increase smallholder farmers’ productivity.
The fund which will be distributed through the Ministry of Food and Agriculture will provide matching grants to agribusinesses through its projects such as the just-ended Ghana Commercial Agriculture Project (GCAP), funded by the World Bank and USAID.
Deputy Minister of Finance, Dr. John A. Akumah announced this at the launch of the 2022 Ghana Agribusiness Investment Summit organized by the USAID and partners event held in Accra.
The summit aims to give the government the platform to highlight a number of its initiatives in support of agriculture financing.
Dr. Kumah explained that the Government through the Ministry of Food and Agriculture with funding from the German Development Bank (KFW) established the Out-grower and Value Chain Fund (OVCF) in 2011 to provide concessionary medium to long-term financing to takers, bulk purchasers aggregators, and nucleus farmers linked to small holder’s out-growers to increase financing to both off-takers ansmallholderer out-growers.
Currently, OV and CF lend at 13%a interest rate which is much lower than the prevailing interest rate of commercial banks.
Additionally, the International Fund for Agricultural Development (IFAD) through the Ministry of Trade and Industry is also implementing the Rural Enterprise Programme (REP) which provides matching grants to agricultural value chain actors to finance agricultural machinery and equipment.
Explaining the rationale behind the government initiative he said this forms parts of the structural reforms at the Ministry of Finance, a special Unit has been created under the Economic Strategy and Research Division tasked to liaise with key sector players to collect data and undertake policy analysis on the agric sector as well as conduct research on agri-business and financing options to boost commercial agriculture in Ghana.
According to him, the Unit will also focus on key drivers of growth in the agriculture sector, leveraging one opportunity provided by the African Continental Free Trade Area to design strategies to boost exports and government revenue from agriculture.
He explained that with the launch of the Ghanaian government-owned Development Bank with a capital of $600 million, the Bank aims to provide long-term lending and advisory services to strategic sectors in agri-business and other small businesses to help meet the demand for credit and to reduce the cost of credit in the country.
Dr. Kumah noted that through the Ghana Incentive-based Risk Sharing for Agricultural Lending (GIRSAL) initiative, the government is directing public policy towards de-risking the agricultural sector including, to attract sustained private sector investments along its entire value chain.
“As a non-bank financial institution, GIRSAL has been at the forefront of agricultural financing, through the issuance of agricultural credit guarantee instruments, to improve credit to the agricultural and agribusiness sectors. In 2021, the value of Agriculture loans for which credit Guarantee issfinancialalal Institutions by GIRSAL was GH¢ 241.7 million” he stated.
He also explained that in alignment with The government’s overall vision of economic revitalization, through accelerated Agricultural Modernisation under GhanaCARE “Obaatan Pa” Programme, various actors in the agricultural value-chain particularly poultry, rice, soya, and tomato sub-sectors have been targeted to benefit from interest rate subsidy intervention that grants 50 percent subsidy on FinanciaInstitutionss’ (FIs) interest charges for loans advanced to qualified agribusinesses to secure equipment and expand working capital for agri-business.
“This year, 16 agribusinesses have been selected to benefit from a total amount of GHS5,953,288.73. So far, an amount of GHS 1,628,933.40 has been disbursed covering eight (8) agribusinesses with eleven (11) loan facilities”.
The Deputy Minister of Finance further noted that the Government’s flagship prprogramsuch as the Planting for Food and Jobs proprogramFJ) and the One District One Factory proprogramD1F) has immensely contributed to the agriculture transformative agenda of the country.
He said the Planting for Food and Jobs (PFJ) program has achieved significant gains in the productivity of selected crops (maize, rice, and soya) through the provision of subsidized seeds and fertilizer to beneficiary farmers. Under the One-Village One-Dam initiative, the Gothe government awarded several contracts for the construction of small earth dams to support the development of irrigation in selected areas in 2021″
He also indicated that the government has also collaborated through the National Insurance Commission with GIZ to develop agricultural insurance for farmers through the Ghana Agricultural Insurance Pool (GAIP).
“GAIP provides traditional agricultural insurance and index-based weather insurance products to commercial farmers and small-holder farmers. The availability of agricultural insurance for farmers helps with access to credit by financial institutions”.
He added that “the Ghana Commodity Exchange (GCX) established under the purview of the Ministry of Finance is an Exchange the additional grains. The GCX enables farmers to use receipts as collateral to access financial services. The GCX currently trades in maize, rice, sorghum, and soybeans, among others”
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